Declining US$s for highways - where tolling fits in

Kenneth Orski who follows transport funding issues in Washington DC says US Government grants to the states for highways will drop from the current level of $41b/year to about $32b next year based on the end of deficit financing under a newly budget conscious House of Representatives. That $32b will be the result of relying solely on federal gas/diesel tax revenues - as we used to before the massive deficit spending of 'stimulus' funds the past three years. (see Orski at www.innobriefs.com)

It's a return to highway users "paying their way" and "living within our means" Orski says citing the popular mantras that now set the tone for US Government budgeting for surface transportation. Handouts for highspeed rail will - hopefully - be zeroed out, and other rail follies contained. Unsustainable 'sustainability' and 'livability' nonsense won't survive the result of last November's election, and the changed composition of the US Congress.

Too much attention is sometimes to Washington DC's role. States and local governments raise fully three times as much for highways as federal funding, Orski points out. They of course face their own budgetary constraints, and lack state 'Reserve' banks with the power to print US$s. And there is almost no stomach in any legislature to raise gas/diesel tax rates - politically directed highway programs are so distrusted.

Some states have been 'borrowing up' heavily themselves for highways loading up on TIFIA and GARVE (grant anticipation) bonds, so an increasing proportion of their gas tax funds and US money goes not to new roads but to paying for past loan-based spending.

IBTTA had a useful panel this week on the major opportunity for tolling in the US - funding the rebuild of the Interstate highway system. Ed Regan of Wilbur Smith Associates gave another of his masterful analyses of the issue and a collection of others gave variations on the theme.

Key point Regan makes is that the cost of essential rebuilding of the Interstate Highways is way bigger than the costs incurred in original construction. What we have now cost around $130b but the cost of rebuilding is in the range $1,300b to $2,500b in current prices - ten to twenty times higher. If spread over 50 years that's an annual expenditure in the range $26b to $50b.

Some of the increase is general inflation, but some is real extra cost - construction under traffic is inherently more expensive than greenfields construction, and we build better than we used to in many respects. Tolling could take on the job of rebuilding the interstates. Current toll revenues are around $10b, and they would need to be increased at least three-fold to take on the Interstate Rebuild job, which Regan calls "probably the most important transport investment in American history."

The opportunity arises out of:

- states desperate for new and sustainable revenue sources

- the greater acceptability and lower cost of all-electronic tolling as compared to earlier methods

- direct user charges and paying-your-way being a theme of the times since it allocates cost directly to those who benefit

- the power of variable and differentiated toll rates to manage traffic and offer free flow

- the potential to tap investor money and management with PPPs

- the states own the interstates so they ultimately carry the responsibility for rebuilds7% of the interstate system (2,921 miles of 48,000) are already tolled plus most of the large bridge and tunnel crossings. 3,175 miles in 17 systems were built as tollroads. Some 254 miles and four systems (CT Tpk 129, DFW Tpk 30, KY Tpk 45, Richmond-Petersberg VA 50) were unfortunately detolled.

Most of the tollroads built in the past 10 years have been non-Interstate in classification, but around half of the new expressway mileage built in that time has been tollroads.

Regan makes the point that tolls represent something of a return to President Franklin Delanor Roosevelt's concept of a system that would be "self liquidating" with tolls and corridor property rights. And to the fact that it started out with 17 toll systems as its basis. The oldest Interstate in the country is I-76 in central Pennsylvania: the Pennsylvania Turnpike.

Trouble is so far the US Congress and the Obama administration cling to their legislative bar on tolling the interstates. Indeed both Secretary Ray LaHood and House committee chair John Mica have said they support tolls for new capacity but oppose its use on existing capacity.

There's little demand for new capacity, but a huge demand for rebuild funds and the management power of tolling. And for its ability to allocate money where it will be most productively used - which the political process does a dismal job of.